How to Open Back to Back L/C in Garment Export Business

Back to back L/C is opened against the original master L/C. Before going to discussion we should know what is is L/C. Abbreciation of L/C is letter of credit. It is widely used in export and import business. A back to back letter of credit is a new credit. It is different from the original credit based on which the bank undertakes the risk under the back to back credit. In this case the bank’s main security is the original credit. There are two types of Back to Back L/C, one is congruent and another is incongruent.

Line diagram of Back to back L/C
Fig: Line diagram of Back to back L/C

In this article I will give a sample of Back to back L/C. I think it will be helpful to know that how to open a Back to back L/C in garment export business. Generally merchandisers do L/C related taks.

642725-ABD BJ     JUL-20-04-93    GA 0080273654 6427571-ABD BJ    73675 AMEXC HX   642757- ABD BJ

To: American Express Bank Ltd. Hongkong
From: Agrani Bank Ramna Branch, Dhaka, Bangladesh
Message no. 10601. Dated 10th april 2003

Test 1385 for USD 64,030,00 with our principle branch as on 20- 04-2003
We open our irrevocable letter of credit No.: 2530/441/87/2003/DTD-20-04-2003

Details of Back to Back L/C as follows:

Hire Fashion Ltd. 700- Mohakhali c/a, Dhaka-1212, Bangladesh.

M/s. Palash Trading Agency RM, 905 A, Pacific Trade Center Kal Hing road, Kowloon Bay, Kowloon, Hongkong (code)

USD 64,030,00 (say USD, sixty four, thousand thirty only) C & F, Chittangong(.)

To be drawn on applicant at 120 days sight from the date of negotiation of documents available for 100 percent of the invoice value (.)
Shipment withing 20-5-93 but within 11 days from the date of shipment (.)
Expiry with 30-5-93 but within 11 days from the date of shipment.


Fabrics for ready made garments………. Quality, specification strictly as per pro-forma invoice.
No. …………………. Dated: …………………….

Shipment: From China/ Hongkong port to Chittagong port by steamer excerpt Iarael, Iraq and South African flag vessels (.)

Partial shipment and transshipment allowed (.)

Documents Required for Back to Back L/C:

1. Commercial invoice in quadruplicate signed by the beneficiary, certifying merchandise to be of china/ Hongkong origin (.)

2. Full set of clean shipped on board ocean bills of lading drawn or endorsed to the showing freight prepaid Ramna branch, Dhaka showing freight prepaid list in quadruplicate required (.)

3. Packing list in quadruplicate required (.)

4. Beneficiary’s certificate starting that the merchandise have been shipped strictly asper pro-forma invoice no. …………

5. Draft must be marked drawn Agrani Bank letter of credit number 2530/441/87/03 (.)

6. Insurance covered by the applicant(.) all shipment under this credit this must be adviced by the beneficiary after shipment direct to M/S. Central Insurance Company Ltd. 83 Motijheel C/A, Dhaka, Bangladesh and to the applicant, referring to cover note on. CIC/LO/MC-461/04/03 Date 20-04-03 giving full details of shipment (.) a copy of the advice is to accompany each set of documents.

Other terms and conditions:

7. All bank charges outside Bangladesh are on beneficiary A/C.

8. Short form bill of lading are not acceptable.

9. Invoice exceedingthe credit amount will not be acceptable.

10. Bill of lading must show weight of the goods and freight charges.

11. A set of non negotiation shipping documents should be sent by DHL orspeed post directly to opener after shipment.

12. The following should be quoted on invoice and bill of lading L/C No. 2530/441/03, L/CA no 46310 pro forma invoice on IWL/DDHT/F-029/03 and export LC No. Nilla !0064828.

13. Guaranteed without formal dehyde.

14. Fabric has been processed by curing/ guaranted without soneel.

15. Shrinkage maximum 4 PCT for 100 cotton in case of T/C 65.35 bPCT.

16. Color fastness must be guaranteed 40 degree for 100 PCT. Cotton in case or T/C washing 60 degree for.

17. Beneficiary must send 10 yards of sample from each color design to the L/C opened by DHL/Courier service latest within 3 days of shipment effected and the receipt must accompanied with the shipping documents.

18. If any transfer is done than the advising bank is requested to provide us with all particulars of beneficiary as soon as the transfer of this L/C is done.

19. L/C is trandferable.

20. Third parties documents acceptable.

21. Interest for usance period are on openers account at bank rate in Hongkong or Labor whichever is lower if payment made before maturity date interest to be reduced proportionately.

22. Pre shipment clause will be vided later on.

Instruction for negotiation bank:

23. Six copies of invoices to be sent to us (Agrani Bank Ramna branch, Dhaka) by DHL or speed post with original set. JIHS tele message will be passed as per above credit instrument and MHIL confirmation will be issued end.

Reference: Garment and Textile Merchandising – by M.A. Razzaque

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